The Harvard Asia Quarterly, in partnership with the Harvard Asia Business Club and the Harvard Asia Law Society, is continuing its history of commitment to the Harvard Asia Business Conference with the Spring 2000 issue. In addition to our feature pieces of general interest, the Spring 2000 issue showcases articles from conference presenters and provides complete coverage of the conference panels. On behalf of our readers, we extend our thanks to the organizers and sponsors of the Harvard Asia Business Conference for their support of the Harvard Asia Quarterly Spring 2000 issue.

["Chief executives from Chinese Internet companies included Jack Ma of Alibaba.com, Edward Tian from China Netcom and Shao Yibo of Eachnet.com, along with representatives from Chinadotcom, Clubciti.com, e-tang.com, Renren.com and Sina.com." (S.China Daily)]

A Summary of Remarks During the 2000 Harvard Asia Business Conference

KEYNOTE 1: Dr. Ronald Chwang, President, Acer Technology Ventures

PLENARY 1: Asia’s Integral Role in the Global Economy

PANEL 1: China’s Entry into the World Trade Organization
PANEL 2: Asian Financial Reform
PANEL 3: Real Estate in Asia
PANEL 4: Restructuring Asian Companies for Global Competitiveness

PLENARY 2: The Next Frontier – Internet in Asia

PANEL 6: Starting a Business in Asia
PANEL 7: The Asian Wireless Telecommunications Miracle: A Case Study on Taiwan
PANEL 8: Japan: Internet and Entrepreneurship
PANEL 9: US Foreign Policy towards Asia

KEYNOTE 2: An Overview of China’s Securities Market

PANEL 10: The Rise of E-Commerce in Asia
PANEL 11: Entrepreneurship in India
PANEL 12: Positioning for the 21^st Century: An Update on Southeast Asia
PANEL 13: The Role of Women in Corporate Asia
PANEL 14: Restructuring the Korean Chaebols
PANEL 15: Entrepreneurship in China: the Promise and its Perils
PANEL 16: Intellectual Property: Keeping Ahead of the Copycats
PANEL 17: Project Finance
PANEL 18: How Will E-Business Impact Asia?
PANEL 19: Entertainment and Media in Asia
PANEL 20: Corruption and Transparency

KEYNOTE 1: Dr. Ronald Chwang, President, Acer Technology Ventures

Xiu Li

Dr. Chwang opened the conference by discussing the impact of the Internet on Asia.

He also pinpointed some of the lessons that have emerged from the Asian economic crisis, namely, that a labor- intensive growth model is not sustainable, that financial leverage alone cannot support over- hyped exuberance, and that vertically integrated conglomerates are difficult to re-engineer. In a theme that was to be reiterated many times during the conference, Dr. Chwang suggested the crisis happened "just in time". If these facts had not been brought to light by the crisis, the inherent weaknesses within the Asian economy would have eventually created complications for the emerging Internet economy.

Dr. Chwang noted that Asia has become a dominant global supplier for high-technology hardware components such as semiconductors, information products, and consumer electronics, making the region an integral part of the global information technology supply infrastructure. He also pointed out that wireless communication technology has spread rapidly throughout much of Asia, as is evident in the phenomenal growth of wireless communication in China. Asia has become a huge consumer market for technology products and services. The number of Internet users in Asia is growing at 56% annually; annual e-commerce volume in Asia will surpass that in Western Europe in 2002 (IDC). These trends suggest the Internet economy is already changing the landscape of Asia’s business structure.

Such profound change, Dr. Chwang noted, will pose serious challenges to existing corporations while giving many new businesses opportunities to participate in growth. In this environment, companies will need multiple strategies for survival and extant firms may have to consolidate their regional organizations into more centralized business groups, use venture investment to extend the reach of their networks, and adopt new organization and managerial styles to compete effectively. Success will demand both global technology and alliances as well as local domain knowledge and structure. Other challenges all Internet businesses will face are the need to manage networks, build lasting global alliances, adapt content to regional differences, and understand the effects of culture on e-business, all while trying to stay on top of the latest technology wave.

The Internet will accelerate the interdependence of Asia and the rest of the world and, in Dr. Chwang's view, Asia is uniquely poised to capitalize on the opportunities created.

PLENARY 1: Asia’s Integral Role in the Global Economy

Sophie Roell

Speakers: Dr. Chong Sup Park, Chairman and CEO, Hyundai Electronics America; Dr. Sun Bae Kim, Managing Director of Asia Economic Research, Goldman, Sachs & Co.; Thomas Langford, Managing Director, Morgan Stanley Dean Witter Asia; Ambassador Seiichiro Otsuka, Ministry of Foreign Affairs of Japan

Moderator: Professor Andrew Gordon, Professor of History, Harvard University

Panelist 1 discussed the surprising speed of the economic recovery in Asia, which he described as a V-shape progression when most people had expected a U-shape or even a L-shape. While panelist 1 identified domestic demand as a key factor in the recovery, other factors include: the role of the public sector, export growth within Asia, and the stronger Japanese yen. Panelist 1 recognized that structural problems had contributed to the crisis, but also claimed that without an "external cyclical shock," Asian economies could actually have "continued growing." "The tinder could have piled up for some time," he noted. However, in a view that was echoed by many subsequent speakers, panelist 1 noted that the crisis had served as a useful "wake-up call," especially to the banking system. He then drew on South Korea as a specific example to highlight the general causes of the crisis, which in Korea’s case included: over-investment, high leverage ratios in the corporate sector, and reliance on short-term debt. The "agent provocateur" was, however, the "sharp deterioration in the terms of trade." Though this had happened in 1979-80 (when Korea had to turn to the IMF), the 1996 deterioration was much more severe. He then tried to look back before the crisis and discover any signs of its arrival. For example, he pointed out that the interest rate spread in the less regulated, offshore foreign exchange market for the Korean currency did show it was "shaky." Another sign was the drop in the Korean stock market at this time. Finally, with the external shock now apparently subsiding and the deterioration in export prices reversing, panelist 1 wondered if the crisis had actually led to any structural improvements. He said it was hard to pinpoint these while they were still going on but claimed there had been some progress. "Some rules of the game have changed," he said. "No one is too big to fail – that has been a strong message." Market-opening measures were also an important result of the crisis.

Panelist 2 followed with a perspective of the effects of the Asian crisis on the corporate sector in Korea. He noted that with the crisis now receding, many people ask him if anything had in fact changed for the better. Some people, for instance, believe that with the economy now recovering, the investment climate in Korea has once again become unfriendly to foreigners. Panelist 2 took the middle ground, noting that in the wake of the crisis there are "things that have changed and things that haven't." For example, he noted that efforts to improve corporate governance by adding external directors to the board of directors hadn't made "any difference," but that efforts to improve performance of chaebols by improving incentives for employees were having a positive impact. On balance he believed that Korea's "big corporations have to change in the midst of these changing processes." For example, it remains a fact that the "capital markets have not yet forgiven Korea."

Panelist 3 analyzing "what really went wrong" and the "lessons to be learnt" from the Asian crisis, put the emphasis first and foremost on the "dramatic role and disruptive nature of short-term capital flows." Such an allocation of blame is perhaps hardly surprising considering his admission of his liking for that outspoken critic of international speculators, Malaysian Prime Minister Mahathir. He was, however, willing to admit that domestic issues such as a sound banking and financial system were also critical. He noted that Japan, contributor of two-thirds of Asia's GDP, was a key element in the Asian recovery. The country "has to achieve robust economic growth," he insisted. Over the past few years there has been "chaos in Japan's economy," he said, and the country "has serious homework ahead." However, he claimed that chaos is sometimes useful in promoting economic development, and that the "basic stability of Japan's financial system is now being restored." Returning to the theme of speculators, panelist 3 noted that Japan "should not learn from the casino capitalism of the US hedge funds," and hinted at hypocrisy in US policy in bailing out hedge fund Long Term Capital Management (LTCM) while criticizing Japan for saving its own weak financial institutions. "Japan said good-bye to that policy recently," he pointed out. In terms of non-economic issues, he noted that the most important thing going forward was that the Asian region avoid a major armed conflict and that key countries work together. In the past, the two key 'elephants' were Japan and the US – now China has been added to the list. Panelist 3 identified the regional organizations APEC and ARF as "important wheels of stability." He also added that "cyber-capitalism" should be considered a "new elephant in the world."

Panelist 4 explicated on the implications of the Asian crisis for the capital markets. True to investment banking form, panelist 4 was rather bullish, viewing the crisis as "very positive, especially for the equity markets." He noted that capital market financing transactions are already surpassing pre-crisis levels and predicted that 2000 would be a "record year for equity issuance out of non-Japanese Asia." The reasoning is as follows: before the Asian crisis bank debt was very cheap, so there was no need for Asian corporates to turn to the capital markets for funding. Now, however, Asian banks will be unable to fund growth for some years, so companies have little option but to turn to the capital markets. In Asia, this tends to mean the equity markets, as "there is little infrastructure in place for a well-functioning bond market." This is a good thing, as corporate governance and transparency will have to improve in order to attract equity investors. Especially with lots of companies looking for financing, panelist 4 predicted that "those who don't restructure will lose out and be left out in the cold." As a result the winners in corporate Asia will shift from companies with a huge asset base to those with impressive growth and profit potential. However, panelist 4 admitted that although the economic rebound in Asia over the past has been better than expected, the restructuring for corporates has been "slower than expected."

(Some members of this panel did not wish to be cited directly.)

PANEL 1: China’s Entry into the World Trade Organization

Victor Shih

Panelists: Mark Groombridge, Senior Fellow, CATO Institute; Jerome Cohen, Partner, Paul, Weiss, Rifkind, Wharton & Garrison

Moderator: Joel Trachtman, Professor, Fletcher School of Law and Diplomacy, Tufts University

The participants of this panel discussed the implications of China’s entrance into the World Trade Organization (WTO) and likely problems that might arise before China’s full integration into the international trade regime.

Adopting a positive stance, Prof. Cohen argued that Zhu Rongji’s presence in the Chinese leadership has stiffened the will to ensure China complies to [with] the regulations of the WTO. Rather than reacting to the discontent of uncompetitive heavy industries, Zhu has made it clear that industries must reform or sink under the weight of foreign competition. Under Zhu’s tutelage, Prof. Cohen argued that the Chinese bureaucracy is slowly beginning to implement banking reforms, streamline its industries, downsize its bureaucracy, and carry out legal reforms. However, Cohen notes that the Chinese government is decentralized, such that central policies might not be carried out in full at the local level. Foreign firms hoping to compete on an equal footing in China might well face local resistance. On a whole, Cohen argues that China’s entrance into the WTO will speed up the pace of legal reform because international pressure will demand a more complete legal structure within which foreign companies can operate.

Mark Groombridge of the CATO Institute concurs that, in the long run, China’s entrance into the WTO will benefit the citizens of both the US and China. However, Dr. Groombridge conceded that special interests on both sides will attempt to prevent China from entering the international trading community. On the US side, the textile industry will ally with bureaucratic actors (the USTR) and members of Congress to ensure the continuation of import quotas. On the China side, uncompetitive state firms will try to derail Zhu’s effort to liberalize the automobile and banking sectors. Despite these difficulties, China’s recent agreement with the US has considerably weakened the forces of protectionism and increased the chances of China’s entrance. Groombridge warned, however, that China’s entrance into the WTO will likely cause painful adjustments as many uncompetitive state firms will have to close their doors, throwing millions more into unemployment. Moreover, the nearly insolvent banking sector might face a serious crisis with the introduction of international banks, offering much higher interest to depositors. Such an environment may jeopardize political stability in China. However, if China can successfully make the transition into the WTO, market forces are likely to play an increasingly important role in the Chinese economy. Dr. Groombridge also concurred with Prof. Cohen in his belief that legal reform will play a pivotal role in the realization of China’s entry into the WTO.

PANEL 2: Asian Financial Reform

Sophie Roell

Panelists: Ellick K.J. Liao, Chairman, Taiyu Securities; Norio Nishi, Vice President, Wellington Management Company, LLP, Boston; John L. Walker, Partner, Simpson, Thacher & Bartlett

Moderator: Howell Jackson, Professor, Harvard Law School

Norio Nishi, Vice President of Wellington Management Company, discussed the effect that economic changes over the past two decades have had on the Japanese financial industry. The economic exuberance of the 1980s—manifested in books such as Ezra Vogel's Japan as Number One—has given way to the recession of the 1990s. According to Mr. Nishi, this has led many people to feel that the "Japanese business model does not work at all. It has become defunct."

In 1996, as a result of foreign pressure to open financial markets, Prime Minister Hashimoto initiated the "Big Bang" reform of the Japanese financial industry. The reforms indicate that the industry is in flux. The current climate provides significant opportunities for western companies to get involved. According to Mr. Nishi, there are many opportunities for foreigners in commercial, retail banking, investment banking, brokerages or insurance.

Mr. Nishi focused his talk on investment management. He noted that the Japanese pension market is the world's second largest and is continuing to grow. Most of that money is allocated very conservatively, dominated by investment in domestic bonds. A series of reforms in the pension industry is, however, opening this market up, making more equity and international investment possible. Furthermore, the break-up of the keiretsu structure is making entry to the market easier, since corporate pension money is no longer automatically handled by the financial arm of the same corporation. For foreigners, opportunities stem from the shortage of experienced investment staff in Japan and the growth in the market as Japan's population ages. Finally, Mr. Nishi looked at opportunities for the mutual fund market, which is presently quite small. Japan’s mutual fund market is about one-fifteenth the size of the US He believes this market will experience considerable growth, especially after the high-yielding postal savings accounts guaranteed by the Japanese government begin to mature in April and Japanese citizens look for new investment opportunities. He noted that some western companies, such as Goldman Sachs, are already playing a significant role in the Japanese fund management market.

John L. Walker, partner at Simpson, Thatcher & Bartlett, discussed the reform of the Chinese banking system. He stated that China has now embarked on "very serious financial reform efforts," but noted it would take a long time to sort out problems. The exact path to take was still "not very clear," he said. This is a transition on a massive scale as bank loans, which have been allocated by state planners for years, come to be determined by the market. According to Mr. Walker, it will take far longer than the three years originally envisaged by the government. "The Chinese jumped off a cliff without knowing how far down it was." He began by offering an overview of the shape of the Chinese banking system and the reforms that have taken place so far. A key element of China’s banking reform has been its effort to establish a divide between commercial banking and policy lending, with a group of newly established institutions set to assume the burden of the latter role. In principle this allows China's other state banks—Bank of China and China Construction Bank—to become commercial entities. However, Mr. Walker made clear that this is easier said than done. It is hard to abandon the habits of the past, and policy lending under pressure from local governments continues. The biggest problem, however, is the non-performing loans that remain on the books of these "woefully under-provisioned" commercial banks. According to Mr. Walker, at least 25 per cent of loans by China's four major banks are non-performing—and that is probably an underestimate. He pointed out that this makes Japan's problems look "minor." However, "liberal accounting practices" and government entities are masking the extent of the problem. For example, one Chinese government office released a statement indicating that problems in the banking sector are being exaggerated in the western media. Mr. Walker noted that the Chinese government needs to "be realistic" about the extent of the bad loans. The cost of dealing with the problem will be huge—some 25 per cent of GDP—and the political will to confront it will also be enormous. However, he warned that "delay will only increase the cost."

Mr. Walker examined some recent efforts to deal with the bad loan problem, such as the initiation of an asset management program, but seemed to view its achievements with a measure of skepticism. Until China's state-owned enterprises are reformed, it will be difficult to establish a healthy banking system because bank lending in China still almost entirely benefits state-owned-enterprises, rather than private sector entities. On a more positive note, Mr. Walker said he believed that given the high level of priority the sector has been given by the government and the high level of state control and government funds available, a systemic banking crisis in China was "unlikely." Foreign banks currently have less than 2 per cent of the banking market in China, but their position is expected to improve with China's entry to the WTO.

Ellick Liao, Chairman of Taiyu Securities Investment and Trust Corporation, presented his views on the causes of the Asian financial crisis. He divided the causes between economic factors—over-investment, trade deficits and huge foreign debts—and institutional factors—a badly performing financial sector and an inflexible exchange rate system. He placed the blame for the crisis firmly on the shoulders of Asia's financial sector, which he described as "very unhealthy, very speculative." He noted, "the crisis cannot be blamed on financial deregulation and liberalization, but on the inappropriate sequence of financial deregulation and liberalization and the lack of prudential supervision." Mr. Liao pointed out that the crisis triggered reform and restructuring of financial systems in many Asian countries, comparing the records of various countries in dealing with the problem of non-performing loans. South Korea and Japan appear to have come out on top, dealing with 36.7% and 86.8% of non-performing loans respectively, according to the most recent data. Mr. Liao held up Taiwan as a good example of liberalization and deregulation of a country's financial sector. Taiwan is taking what he called the "step-by-step" approach. He predicted the process of financial reform in Asia would take ten to fifteen years.

PANEL 3: Real Estate in Asia

Xiu Li

Panelists: William C. Weaton, Professor, Department of Economics, MIT; Timothy Riddiough, Department of Finance, MIT; Zheng Xin, Chairman, Redstone Industries; Pearl Lam, CEO, Director, Highfit Development Co.

Moderator: Kathleen Smalley, Senior Vice President, Catellus Development Corp.

Professor William C. Wheaton of MIT’s department of economics opened the panel with a discussion of Asian real estate cycles. He noted that developments in real estate markets do not always mirror trends in broader economies since real estate is a nonperishable good often governed by long-term leases. In the European Union, for example, the real estate crashes in 1975-76 and in 1989-90 did not correspond exactly to the recessions in Europe over the same period, and the recession of 1982-84 had no impact on the real estate market whatsoever.

Asian real estate markets, however, are characterized by shorter leases and fewer institutional limitations. As a result, they tend to move more in tandem with the economies of the region. For example, in Hong Kong, Tokyo, and Singapore, the most important real estate markets in Asia, downturns in real estate markets in 1977, 1985, 1992, and 1998-1999 coincided with each other and also with the broader regional economic downturns in the preceding years. Bangkok, a newer real estate market, also follows the others in their ups and downs; Australia, however, does not. The Asian real estate markets also exhibit a high degree of volatility. Sydney and Tokyo are the least volatile at 100% from peak to trough, while in Singapore and Hong Kong the swing can reach 300%.

Professor Wheaton summarized the economic situation in various countries in Asia after the financial crisis. Australia is well on the road to recovery, although it was not a particularly fast-growing economy in the first place. Japan, with the highest GNP of all the countries in Asia, has not done as well. Optimists predict Japan is one year from recovery, while the pessimistic view is that there might not be a recovery at all. Hong Kong faces a major battle in the next ten years, as it competes for capital with the mainland. Since capital flow in the region is limited, Shanghai and other big cities in China will take some of the business from Hong Kong. So even though most people expect Hong Kong to recover in the next few years, it may well lose its position as the only financial center in the region. Although Thailand’s real estate market is still doing poorly, it is likely to make a fast recovery since it was never one of the more developed regions in Asia. Singapore, on the other hand, is one of the most developed regions in Asia, but has slowed down and will not be experiencing the fast growth it had before the crisis. China is a difficult country to analyze, but Professor Wheaton suggested that it will probably bounce back and grow at a fairly fast rate.

Timothy Riddiough, professor of real estate finance at MIT addressed the treatment of non-performing loans, and development in Asia more broadly, applying several lessons from the US to the Asian context. Non-performing loans are a particularly important issue in Japan. Before the financial crisis, Asian economies commonly relied on strong central banks as intermediaries in the flow of capital, an approach dependent on bilateral, information-heavy relationships between central creditors and borrowers. Although this approach worked well when the economy was doing well, the systemic problems uncovered during the crisis favor switching to a market-based approach. A market-based approach is multilateral rather than bilateral, values transparency rather than opaqueness, and favors liquidity over illiquidity. There are two schools of thought on how to accomplish this transformation—the Keynesian view that inflating the economy will do the job and the emphasis on retooling institutions to be more market-oriented.

Addressing the relationship between real estate development and the economy, Professor Riddiough urged governments in Asia to keep uncertainty low to foster development. Changes in regulatory and monetary policy can breed uncertainty and volatility in markets, affecting real estate development.

The third speaker for the panel was Zhang Xin, the CEO and chairman of Redstone Industries, who talked about the Chinese real estate market. The Chinese real estate market is not as mature as in other parts of Asia. It got its start in the 1990s, when Premier Zhu Rongji pronounced real estate a new economic growth area. Real estate has had a tremendous trickle-down effect in that people buying real estate will often also buy furniture and appliances, enlivening other parts of the Chinese economy. Construction also creates jobs and revenue. To support development in real estate, the Chinese government started a housing reform project in 1998 to restrict work units, which had previously allocated homes to their employees, from buying properties. The government also started a mortgage program supporting individual buyers and privatized property.

Despite the progress, the mortgage system in China is not perfect. Although the system enables many individuals to enter the market, Ms. Xin said, the banks make things difficult for the buyers. State-owned banks have never done retail banking, since they previously lent only to enterprises. As a result, they have no experience in assessing creditworthiness, making it difficult for them to make wise lending decisions. The banking industry, plagued by the problem of non-performing loans, will need to undergo reforms, particularly given China’s anticipated entry into the WTO. Because the close relationship between banks and developers can complicate loan repayment solutions, the best answer may be to allow the banks to lend directly to individuals. This might also solve the problem of oversupply, which is a result of defective products in the real estate market.

Pearl Lam, the CEO and director of Highfit Development Company, spoke from the perspective of an overseas developer servicing the high end of the market in China. Ms. Lam first noted the changing climate in the Shanghai real estate market. Once market reforms were implemented, the real estate and construction markets in Shanghai began to flourish, contributing in a number of ways to Shanghai’s economy. The boom has raised construction standards and encouraged greater attention to aesthetics in urban planning. However, several challenges and opportunities loom in the Shanghai real estate market today. First, government policy has been unpredictable. Second, there are few standards and little accountability. There is also a notable lack of financing, especially for state-owned enterprises. It is also difficult for overseas investors to find financing in "luxury" projects in China due to the oversupply of housing and the real-asset based valuation method used by Chinese banks, which does not take into account potential earnings. Nevertheless, earning opportunities abound in the high-end real estate market; observers speculate that returns on a high-end real estate development project in Shanghai are now around 18%. In addition, the Shanghai government has adopted a number of favorable policies to encourage investment in the "luxury" end of the real estate market. These measures include tax incentives, extended land lease periods, and lower interest rate financing for public housing. Ms. Lam expects even better opportunities to arise in the market with China's entry into the WTO.

PANEL 4: Restructuring Asian Companies for Global Competitiveness

Maria Goff

Panelists: David Anderson, Managing Director, Lazard Asia; Hsiao-Chiung Li, Partner, Shearman & Sterling; David Zhe Wei, Managing Director, Oriental Security, Inc. Shanghai

Moderator: Louis Wells, Professor, Harvard Business School

In the age of the Asian Financial Crisis, many companies in Asia have started the process of restructuring their companies. The three panelists for the talk entitled "Restructuring Asian Companies for Global Competitiveness" spoke to an overflowing audience about the reasons why Asia has not completely pulled out of the crisis and the importance of looking towards Asia's financial future. They also discussed the role of Asian companies in today's new globally integrated economy. David Anderson, the managing director for Lazard Asia gave a talk about the "old Asian" companies. In a lecture that revolved around his experience with Daewoo, the largest restructuring case in history, Mr Anderson stated that the main problem for Asian companies and their investors was the old assumption that the lenders often believed they were lending to the government. Hsiao-Chiung Li, a Partner with Shearman and Sterling discussed restructuring in Hong Kong and also lectured on a case study about the restructuring of one particular company. The last of the speakers, David Wei, Managing Director, Oriental Security, inc. Shanghai talked about SOE competitiveness and China's WTO entry. He also spoke extensively about the future of China's different markets as well as their strengths and weaknesses. Overall, the talks by these three specialists was well received and was followed by a lively discussion at the end of the talks.

PLENARY 2: The Next Frontier – Internet in Asia

Virginia Harper-Ho

Speakers: Duncan Clark, Founder, Partner, BDA (China) Limited; Jim Hildebrandt, Managing Director, Bain & Company (Asia) Limited; Yun (Jack) Ma, CEO and Founder, Alibaba.com; Hurst Lin, Vice President, Business Development, SINA.com; Andrew Miller, Senior Vice President, China.com

Moderator: Walter Kuemmerle, Professor, Harvard Business School

The dot.coms represented by the panelists are testimony to the wisdom of borrowing from the experience of American e-businesses. However, the success of these ventures would have been impossible without careful consideration of and adaptation to the Asian context. Despite the assimilating effects of globalization, the unique social, economic, cultural, and political environment of the Asian countries continue to shape the way the Internet can be utilized. The interdependence of the Asian economies also means that technological advancements in the major markets will affect the future of e-commerce across the region. One example is the growth of wireless technology across Asia, which for the past 10 years, developed without Japan. With Japan now joining the trend, wireless technology has become the key to communications in Asia and around the world.

In some parts of Asia, government restrictions have slowed the expansion of e-commerce. This has been particularly true in the PRC, where numerous agencies, ranging from the Ministry of Information to the Ministry of the Public Security Bureau, have created a dense mass of regulations affecting the use of the Internet for business. However, despite the "complex, contradictory, and changing" attitude of the PRC government, e-business continues to expand across China. The enormous potential of e-commerce in Asia still has its risks. Investors are advised to be very selective in the business plans they pursue, not only because of the flood of eager dot.coms looking for seed capital, but also because timing is vital to the success of an e-venture. For those looking for investors to finance their new e-commerce ventures, panelists pointed to Hong Kong, Silicon Valley, and even Beijing as home to some of the top backers of Asian e-commerce.

PANEL 6: Starting a Business in Asia

Sophie Roell

Panelists: Chih Cheung, President and CEO, HelloAsia.com; Yi-Bo Shao, Founder and CEO, EachNet.com; L. Y. Wang, Founder, Roly Internaitonal Group, Taiwan; Larry Wang, Founder and Managing Director, Wang & Li Asia Resources

Moderator: Marco Iansiti, Professor, Harvard Business School

This panel took the form of a discussion, as Larry Wang, founder and managing director of recruitment agency Wang & Li Asia Resources asked questions of various other Asian entrepreneurs. They were: Yi-Bo Shao, founder and CEO of EachNet.Com, an online auction site in China, and Chih Cheung, president and CEO of another internet company, HelloAsia.Com. Both Mr. Shao and Mr. Cheung are members of Harvard's MBA Class of '99. L.Y. Wang, founder of Roly International Group Taiwan’s and president of its Asian operating and holding company, Vigor International, represented the older generation of entrepreneurs. This is a more traditional business, distributing licensed consumer and lifestyle products.

A few noteworthy points emerged from the discussion:

• Starting a business in Asia these days seems necessarily to involve the internet. As one panelist said to the packed auditorium of conference delegates: "For most people here thinking of starting a business it means starting an internet business." Larry Wang pointed out that in his recruitment business 80% of what he does is internet-related.
• Human resources are the key to success in the internet business, and having a good partner is critical. Typical comments during the discussion: "People are the most important thing;" "I can't imagine I could have done this without a good partner;" "human resources is one of the toughest things in this business, and it all comes down to your partner, because there are five people out there who have the same idea as you, and the capital is there." Larry Wang noted that approximately 90% of the people he recruits for internet positions have no internet experience.
• Financing is apparently not a difficult task. As Mr. Cheung noted several times, "Funding is not the issue. You have to watch your cash flow, but it's easy to raise the capital." Attending Harvard Business School is an advantage, and home-grown entrepreneurs are unlikely to be as lucky. Remember to raise more money than you think you'll need, panelists urged, since one ends up spending more than one expects.
• Technology is key these days. According to one of the panelists, liberal arts -minded business school graduates "underestimate the need for technology, even if [they] are not in a technology-related business."
• Profitability is not an immediate goal. Neither Mr. Cheung's nor Mr. Shao's company is yet making a profit. According to Mr. Cheung you "really can't talk pay-back." In answer to the same question about profit, Mr. Shao said, "it depends on the business model. There are models that will never make a profit. We're aiming at a profit in three years." Mr. Cheung explained that becoming a big brand name necessarily involves investment: One could turn a profit sooner, but that would involve reducing investment in services and marketing.

Each of the entrepreneurs had a different "biggest fear." Mr. Shao's concern was the disintegration of his team, as well as regulatory risk. This followed from an earlier point that in China one has to spend more time than elsewhere "thinking about the government, and the relationship with the official media." Mr. Cheung most feared over-selling his capabilities. He said, "There's not a lot of talent out there [in terms of technology] and I have to stop the sales and marketing team [from] over-selling, or selling something that we can't deliver." L.Y. Wang's was an honest touch of realism: "Myself. I have to prevent these young kids from kicking me out of the market."

PANEL 7: The Asian Wireless Telecommunications Miracle: A Case Study on Taiwan

John Ruwitch

Panelists: P. T. Chiang, Regional Marketing Manager, Motorola, Taiwan; Dr. Shyue-Ching Lu, President and CEO, Chunghwa Telecom Co., Ltd.; Dr. Chi-Kuo Mao, Vice Minister, Ministry of Transportation and Communications, Republic of China; Jimmy Yau, President and COO, KG Telecom

Moderator: Jonathan West, Professor, Harvard Business School

In a panel discussion on the telecommunications market in Taiwan, representatives of the government, of Chunghwa Telecom, Taiwan's shrinking telecom monopoly, and growing private telecom companies expressed similar views on the state of affairs in this expanding and dynamic sector. Deregulation and increased competition have been driving forces behind Taiwan's rapidly unfolding telecom miracle.

If it moves, regulate it. Not long ago this was the government's attitude toward the telecom sector and other strategic areas of the Taiwanese economy, according to Dr. Chi-Kuo Mao, Taiwan's Vice Minister of Transportation and Communications. Outlining the major trends in Taiwan's telecom sector, Dr. Mao pointed out that things have changed in recent years, and the new regulation regime is now significantly more laisseez-faire. "[If] anything moves, leave it alone, and anyone who regulates [it], then kick him!", exclaimed Dr. Mao at one point.

It is this change in attitude that has brought about the astonishing growth the telecom industry has seen in Taiwan, beginning in 1996 with the abolishment of the Chunghwa Telecom monopoly and continuing with further opening to competition in the fall of 1999. In December 1997, according to Dr. Mao, only 6.9% of Taiwan's population, or about 1.5 million people, used cellular telephones. By November 1999, that number had grown over 630% to some 49.5% or 10.1 million people. With over 11,000 wireless stations across the island, Taiwan has become one of the best-served areas in the world -- better by far than Boston, he pointed out. Moreover, average minutes per user in Taiwan are increasing, and average revenues per user are decreasing as fees have fallen significantly.

Deregulation has produced a "win, win, win result," according to Dr. Mao. Consumers get better service and better prices, and operators have generally been breaking even within two years of entering the market. Moreover, the government has benefited from the promotion of successful policies, which are encouraging infrastructure development, innovation, fair competition, and an equal service environment.

Dr. Shyue-Ching Lu, President and CEO of Chunghwa Telecom Co., Ltd., also looked positively upon the developments in Taiwan's telecom sector. Though he named technological advances in signal processors as the driving force behind the growth of the industry, he conceded that liberalization was also a critical factor. Chunghwa, as the incumbent former monopoly, has quickly been learning the harsh lessons that the market teaches about competition, customer service, and other aspects of doing business without government protection.

According to Dr.Lu, Chunghwa has encountered various problems. Initial projections of demands were too conservative, procurement of network technology and equipment was too slow, and network capability lagged behind network demands. As a result, waiting time for phone service was between 6 to 12 months, one-rate service plans turned out to be too rigid, and because Chunghwa was used to operating as a monopoly, it had no advertisements.

To counter the shocks of competition and to capitalize on high industry growth, Chunghwa took a number of steps. Among other things, Chunghwa reengineered its procurement process and installation equipment, promoted direct sales from employees, spent more on advertizing, offered a variety of packages to customers as opposed to its previous single-package offer, introduced value-added services like messaging and mobile banking, set up customer service centers, and re-balanced rates.

In general, Dr. Lu pointed out, the results of these reforms have been positive. Network capacity has increased from 1.3 million to 3.5 million in the two years since the changes began, the number of subscriptions has risen from 1.49 million to 3.7 million, market share has risen by about one third, quality of service has improved markedly, and revenues have increased. Viewed by Dr. Lu as the only way for Chunghwa to stay alive in an increasingly competitive and consumer driven market, privatization is the next major task for the coming year. By July 2001, as the result of a two-phase share release, the government is scheduled to own less than half of Chunghwa. Thirty-three percent is to be sold by the end of this year, and an additional 33% by next year.

The third speaker, Jimmy Yau, President and COO of Koo's Group (KG) Telecom, offered yet another positive view of the telecom world in Taiwan. In his opinion, competition and technological advances form the basis of change in this sector, and they are propelling Taiwan toward what he called the "mobile information society." Private mobile operators, according to Mr. Yau, are playing a key role in telecom development. Foremost, they create competition, which has knock-on effects across the industry. Private operators increase the reliability of mobile service; as more people get mobile service, more growth will stimulate offers of enhanced services. In addition, the service quality and coverage of mobile networks will increase, creative services that combine high tech with the human touch will be actualized, air time service will become more economical to end users, growth in related businesses will be expedited, and operation efficiency will rise as survival becomes increasingly dependent on it.

Mr. Yau warned that there are, however, challenges facing private mobile operators in Taiwan. High on the list is the fact that as "voice revenues" -- revenues from the voice (i.e. non-data) telecom use -- decrease the "break even point" is affected. Moreover, with current market penetration over 50%, future growth will likely be slower than that over the past few years. Mr. Yau predicted that there will be numerous merger and acquisition deals in the future as competition intensifies. Finally, the challenges of technological innovations -- particularly the so-called "3^rd generation" technology, digital multimedia -- will take their toll on those companies that are slow to adapt. In Mr. Yau's estimation, his vision of the "mobile information society" is already underway. It will entail, among other things, wireless internet access and "hear" phones as well as "view" phones with high resolution video screens. GPRS/3^rd Generation mobile technology, Mr. Yau predicted, "will change the way we live." Additionally, users will adapt to and even demand new value-added services. Mr. Yau explained that the realizing the "mobile information society" requires three key factors. First, data speed must be increased. Second, a reliable GPS network for data transmission must be in place. Third, content will have to improve. The name of the game for telecommunications is getting people to spend more time on-line or on their mobile phones, and the way to achieve this is with appropriate content.

The fourth and final speaker, P.T. Chiang, Regional Marketing Manager of Motorola, Taiwan, emphasized the importance of the telecommunications industry in Taiwan by pointing out that spending on advertisements in that industry exceeded such spending in any other industry last year. While not contributing directly to the debate among service providers, Mr. Chiang offered an idea of how growth affects the technology and mobile device producers. Motorola currently sells more hand sets in Taiwan than any other producer, though Nokia is a close competitor. A graph displayed by Mr. Chiang indicated clearly that the smaller competitors have a difficult time competing. Retention of customers, Mr. Chiang pointed out, is critical to survival in this industry with its high turnover, tough competition, and quick changes, noting that creativity and value-added customer services are two of the most important factors in customer retention.

PANEL 8: Japan: Internet and Entrepreneurship

Barrry Myers

Panelists: Hitoshi Suga, President & CEO, Mitsui Venture Capital Corporation; Hajime Tanahashi, Attorney, Mori Sogo Law Offices at Tokyo; John Wall, President, Nasdaq Amex International, Ltd.

Moderator: Walter Kuemmerle, Professor, Harvard Business School

Hitoshi Suga, President & CEO, Mitsui Venture Capital Corporation, suggested that the climate for entrepreneurship at the beginning of 2000 is changing due to the restructuring of large Japanese corporations, which is encouraging some employees to jump ship and start their own ventures. According to Mr. Suga, however, what renders this new crop of entrepreneurs unique is the increased level of skill and competence which they bring to new businesses. No longer are they dropouts or counter-culture individuals, unable to conform to the large corporate mold; instead, they are top-notch, qualified entrepreneurs. To the venture capitalist, this is highly significant because people and talent are the two most important factors taken into consideration when deciding whether or not to support start-up ventures. Another important factor, according to Mr. Suga, that has led to an increase in entrepreneurship in Japan is the arrival of Nasdaq. Indeed, two hundred companies are expected to go public this year in Japan.

Hajime Tanahashi, Attorney, Mori Sogo Law Offices at Tokyo, practices in the areas of venture capital finance and mergers and acquisitions, amongst others, and noted that traditionally taking a company public in Japan was a twenty year project. Therefore, there had not been much incentive to invest in start-ups. Today, however, with global capital much more available to Japanese start-ups, it has become easier to start a new business. He cautioned, however, that start-ups in Japan face different commercial codes than in other countries. In the United States, for example, it is comparatively easy to incorporate and file a new company, while in Japan there is a minimum capital requirement of $100,000. Bankruptcy laws are also different. Potential entrepreneurs must consider that small and medium-sized companies still face enormous social obligations that make bankruptcy more difficult in Japan than in the United States.

John Wall, President, Nasdaq Amex International, Ltd., in discussing how venture capital and entrepreneurship have changed in Japan, noted that in the past foreign investors could not easily access the Japanese market. Today, however, via the Internet and Nasdaq’s entry into Japan, global financial resources can freely flow from around the world to Japanese start-ups. A Japanese CEO, for example, providing a quarterly earnings report, can now instantly reach global investors via live video feed on the Internet. According to Mr. Wall, NASDAQ.COM, which currently receives approximately 33 million hits a day, will offer a major link between foreign investors and Japanese start-ups seeking access to capital.

PANEL 9: US Foreign Policy towards Asia

Swarnim Wagle

Panelists: Ambassador Tan Sri Dato’Abdullah Ahmad, Special Envoy to the UN, Government of Malaysia; Dr. Alan Wachman, Professor, Fletcher School of Law and Diplomacy, Tufts University; Allan Song, Program Officer, Smith Richardson Foundation

Moderator: Jerome Cohen, Partner, Paul, Weiss, Rifkind, Wharton & Garrison

Moderator Jerome Cohen, former professor at Harvard Law School, opened the panel by introducing three important "international" problems in Asia: the India-Pakistan nuclear standoff, the cross-Straits relations between China and Taiwan, and the situation in North Korea.

The first speaker, Abdullah Ahmad, Special Malaysian Envoy to the United Nations, presented a highly critical appraisal of American foreign policy. Believing the imbalance of global power following the collapse of the Soviet Union has led the United States to pursue "imperial ways" and "politics of ends, not means," Ambassador Ahmad argued that US hegemony is bound to be challenged in the new century by China, the EU, and a revitalized Russia. Contrasting American concern over human rights in Asia with its lack of concern for the Middle East, he alleged that US foreign policy was driven by realpolitik and double standards. Acknowledging China’s significant influence in East Asia, Ambassador Ahmad said global markets would undergo a serious change if only half of China’s current population were to be twice as rich by the beginning of the new century. Mentioning problems of global scale, such as population growth, AIDS, and illegal drugs, Ambassador Ahmad called for a stronger UN to take on these challenges and to prevent conflicts that would increasingly occur on a local level. He similarly warned that while globalization delivered riches to the already wealthy, processes beyond their control, as seen in the East Asian crisis, devastated the poor. He ended on an optimistic note, citing the possibility that the twenty-first century will be the "Pacific century."

Allan Song of the Smith Richardson Foundation, speaking on US-Japan relations, commented that the state of affairs between the world’s two largest economies are at present "uneventful." Viewing such passivity as unsatisfactory, Mr. Song argued that by virtue of their economic clout, the two countries had considerable obligations to the world community. He said it was a pity that they were not working closely to chart out a positive direction for future relations, especially in the context of a world today that lacks the intellectual-ideological framework of the cold war era. He also remarked on how the Japanese economic recession of the 1990s discredited the "revisionist school of thought" that argued that the model of capitalism in Japan was different from that of the West, a model seemingly devoid of the seasonal cycles of boom and bust that plagued Western capitalism. He also discussed the potential dangers present if the policy-making elite remains aloof and unaware of the immense value changes occurring within the ranks of the younger generation of Japanese, where the massive generational shift is resurrecting a nationalist mood in the country. Mr. Song ended by reiterating that the US and Japan need to capitalize on what he viewed as a very good opportunity to show the rest of the world what the two giants can accomplish through cooperation.

Alan Wachman of the Fletcher School of Law and Diplomacy focused on cross-Straits relations, highlighting how US foreign policy under President Clinton has sent misleading signals concerning Taiwan and China. While this "fuzzy ambiguity" served well in the past, Mr. Wachman argued that a critical moment has emerged in US policy towards China. Referring to the Taiwan Premier Lee Teng Hui’s controversial visit to the US a few years ago, he further argued that the administration’s policy of dealing with crises on an ad-hoc basis was flawed, leading to a sequence of mishaps that could have been avoided. Clinton’s overt endorsement of the "One China" policy to appease the anxious Chinese leadership conveyed a strong but subtle message that the US was no longer an uninterested party, but one that "sought a particular outcome" from a distance. According to Mr. Wachman however, this stance is at odds with actual behavior - as the US is fully immersed in this issue, having chosen to continue the arms build-up of Taiwan.

Professor Cohen wrapped up the discussions putting forth some of his own insights into the Asian puzzle. He stated that while the uncertain status of Taiwan in terms of modern international legal instruments has continued to justify US presence on the island, the Chinese leadership has its own views on how moves toward secession ought to be handled. He argued that during his last visit to the US, Premier Zhu Rong-ji was clear when he quoted the former American President Abraham Lincoln on the legitimacy of the use of arms by sovereign states to suppress secession. In addition, he argued that the US should analyze the human rights environment in China in a more positive light. He further argued that instead of using the issue as a tool for condemnation, the US should be assisting processes of legal reforms in the PRC. Prof. Cohen finished his talk with a criticism of US policy towards North Korea, arguing that Americans were sustaining an unsustainable regime through generosity, instead of pursuing pragmatic policies to engineer the pariah state’s gradual integration into the rest of the world.

KEYNOTE 2: An Overview of China’s Securities Market

Virginia Harper-Ho

Speaker: Guangshao Tu, President of the Shanghai Stock Exchange

The Chinese securities market has been booming since its inception. Growth of the Shanghai Stock Exchange in particular has been astounding. Since 1990, when the Exchange opened with 8 listed companies, the Shanghai Exchange has burgeoned and now boasts 1000 listed companies with a total market value of US$320 billion, comprising 32% of the PRC’s GDP. In this past year alone, the volume of shares traded on the exchange has grown 33%.

This rapid expansion of China’s securities market is expected to continue, spurred on by technological, regulatory, and legal advances. Internet connectivity, large-scale telecom satellite systems, and computerized trading, clearing, and settlement are part of the modern market facilities of the Shanghai Exchange. Regulatory reforms have abolished the former quota system, increased transparency, created innovations in IPOs and pricing, and shifted the role of the regulators from granting approval to conducting independent verifications. China’s Securities and Regulatory Commission, the Chinese equivalent of the SEC, has also directed its attention to policies that promote sound corporate governance and protect small investors, including information disclosure, shareholder supervision and the use of consistent accounting standards. Legal reforms are key to China’s economic development, said Tu, and the adaptation and reform of the regulatory structure will facilitate the growth of China’s securities market. A major step in this process was the promulgation of the 1999 Securities Law on July 1, 1999. The growth of the securities markets has facilitated domestic financing of Chinese enterprises, promoted enterprise and management reforms, and promoted the development of high-tech companies.

The Chinese securities market has moved toward increased globalization. Partnerships have been established with the NYSE, the Nasdaq, and the London Stock Exchange. Since 1992, China’s exchanges have been open to a sizeable B-share market, trading shares held by overseas investors. 46 Chinese companies are currently listed on foreign exchanges, with the approval and full support of the CSRC. China’s entry into the WTO is expected to further the opening of the Chinese securities market. In the coming years, China’s securities market will experience an environment of intensified competition, accelerating technological growth, and closer alliances between exchanges. The CSRC will focus on strengthening the legal system, improving risk control, and enhancing the quality of securities professionals to meet the demands of the growing market. These measures ensure that the securities market will play an important role in reforming state-owned enterprises (SOEs), growing high-tech companies, and improving efficiency and competitiveness throughout the Chinese economy.

PANEL 10: The Rise of E-Commerce in Asia

Virginia Harper-Ho

Panelists: David Liu, COO, AsiaCD.com; Yun (Jack) Ma, CEO and Founder, Alibaba.com; David Michael,Vice President and Director, Boston Consulting Group, Hong Kong; Sally Shi, Vice President of Business Development & Marketing, Clubciti.com; Hurst Lin, Vice President of Business Development, SINA.com

Moderator: David Michael, Vice President and Director, Boston Consulting Group, Hong Kong

Moderator David Michael, Vice-President and Director of Boston Consulting Group (BCG), Hong Kong, opened the panel with an overview of e-commerce in Asia, drawing on the firm’s research and strategy work in Asia. Although e-commerce in Asia is shaped by the unique features of each country, the Asian countries can be loosely divided into three categories with common characteristics: 1) those that have large business-to-customer markets (B2C), extensive infrastructure, and high Internet usage (Japan, Australia, and Korea); 2) those with small B2C markets and limited e-commerce spending per capita (Hong Kong, Singapore, New Zealand, and Taiwan); and 3) those that have small B2C markets and little Internet usage (PRC, India, Indonesia, Thailand, Malaysia, and the Philippines).

As for the consumers, or demand side, of Asian e-commerce, the majority of online retail consumers are currently in Japan (54%), followed by Korea (29%), and Australia/New Zealand (19%). This market is the target of a supply-side flood of online retail services. Although in aggregate, online retail business in Asia at the current level of US$2.8 billion is still small compared to the US$40 billion of online retail business in the US market, this high volume will in all likelihood continue to rise to keep pace with the growing demand. The biggest e-commerce sectors in Asia are for PCs, online stock trading, and travel, and surprisingly, 86% of the sites from which Asian consumers are buying are Asian sites. Still, not every e-business will be able to succeed in the Asian e-commerce market. To tap into the astounding potential of this market, e-businesses have to focus on the offline needs of customers and on developing talented people and strategic partnerships.

Hurst Lin, Vice-President of Business Development for SINA.com, used his company as an example of meeting customer needs to build a successful business. Originally, the founders of SINA.com saw the company as a base for e-commerce, not as a portal. But it was the portal concept that took off. SINA.com has tailored its site to respond to its visitors’ needs and then tries to incorporate e-commerce opportunities into their site.

AsiaCD.com, represented by panelist David Liu, the Chief Operating Officer of the company, is another e-commerce success story. Its vision is to meet the growing demand in the Asian market for entertainment, a sector in which more consumers are moving online. Liu pointed to the increased spending across Asia in music, video, and other entertainment products, a trend currently led by Japan, as an indication of the high potential of e-commerce in the entertainment sector. The obstacles AsiaCD.com currently faces are related to infrastructural problems, for example, the high cost of connectivity in Japan and the lack of technologies like barcodes among suppliers. The company has also worked to address such cultural and logistical barriers as the problem of online orders in a cash-based society.

Sally Shi, Vice President of Business Development and Marketing for Clubciti.com, which markets Asian products to the global Asian community, has also faced some of the same challenges. In the PRC, Clubciti.com has succeeded in overcoming logistical barriers by adapting to local delivery modes, such as the use of COD and bicycles rather than credit cards and FedEx. Shi also emphasized team relationships and strategic alliances with established retailers and services as vital to e-commerce success in Asia.

Unlike the other businesses represented on the panel, Alibaba.com, founded by CEO Yun (Jack) Ma in March 1999, focuses on business-to-business (B2B) e-commerce. Ma has found success focusing on small- and medium-sized businesses, the "shrimps" of the import-export market, rather than on the major high-tech firms common in the European or US model of B2B e-commerce. The dominance of these small businesses in Asia makes them an important part of Ma’s e-commerce strategy, and Alibaba.com seeks to respond to the unique needs of these rapidly changing, technology-hungry businesses.

The rapid growth of e-commerce in Asia presents great opportunities. While obstacles to e-commerce do exist, the advice and example of the panelists show how barriers can be overcome. Creative strategies are being developed to bring those opportunities to life.

PANEL 11: Entrepreneurship in India

Swarnim Wagle

Panelists: Partha Sarthy, Chairman and CEO, Aztec Software; Rajesh T.S. Reddy, Founder and CEO, Gray Cell; John Everett, Principal, VIEW Group

Moderator: Vikrant Raina, Principal, Boston Ventures Management

Two young entrepreneurs in the field of information technology, Partha Sarathy and T. S. Rajesh, and American venture capitalist, John Everett, led an interesting panel discussion on entrepreneurial issues in India, especially in the booming information technology sector. Moderated by Vikrant Raina, Principal at Boston Ventures Management, the discussion was informal and elicited active participation from the audience.

Partha Sarathy began by sharing his experience on how the lack of funding thwarted the growth of new ventures during the early days of the IT industry. Because banks generally required mortgages, he had to borrow from friends and repay them in equity shares. Venture capitalists slowly emerged to finance projects after start-ups began to demonstrate their growth potential. But many initiatives still fall through because of insufficient funding. While multinational companies such as Hewlett Packard and IBM still attracted some of the best in the field, more IT experts were joining start-ups after being disillusioned in big organizations. The understanding among employees that start-ups provided better compensation through stock options helped instill loyalty within these companies. Moreover, Sarathy noted that contrary to common perceptions, there has been little political or governmental interference with his business. Because of the very nature of the industry, with much of the transactions conducted online rather than through the physical transfer of goods, these companies avoid the pervasive corruption and bureaucratic inefficiency that plague other industries.

T.S. Rajesh, Founder and CEO of Gray Cell, agreed with Sarathy on problems with inadequate funding. The average length of time it takes to mobilize sufficient resources to get started is especially long in India. He recalled having to borrow at exorbitant rates to start his wireless-internet business. In a rapidly changing industry like information technology, where success depends on innovation and change, spending over a year to obtain funding is a serious disadvantage. As Indian professionals excel in the Silicon Valley and as homegrown companies such as Infosys and Wipro have suddenly become global players, interest in financing the dot.coms in Mumbai, Bangalore and Hyderabad has burgeoned in recent years. Rajesh also observed that Indians are beginning to appreciate the idea of "wealth creation". This appreciation would help to gradually change societal perceptions of full-fledged entrepreneurship in a country that has historically remained suspicious of capitalism.

Intrigued by the potential of the information technology sector in India, John Everett’s company is working exclusively with Indian entrepreneurs. Everett claims that new ideas are now more likely to be matched by new funds. Still, the total pool of venture capital in India, currently standing at US$ 1 billion, is very modest compared to other countries. As the information technology sector becomes attractive, talented individuals, who in the past would have been content with traditionally respected positions in the Indian Administrative Service or in big companies such as Hindustan Lever, are becoming entrepreneurs. Everett identified cumbersome government regulations and opaque tax policies as being responsible for stunting growth in other areas. One notable example is the Indian aluminum industry, which still lags the rest of the world despite the fact that India possesses one of the largest deposits of Bauxite. Everett argues that the information technology sector in India has prospered, because it is not burdened by regulation and heavy taxation. However, India still needs to improve its infrastructure like roads and power if it is to attract foreign capital in the future.

Moderator Vikrant Raina, who helped to establish the Mumbai office of the Boston Consulting Group, asserts that the information technology sector demonstrates how creation of wealth and jobs is the only way to combat the country’s biggest challenge–poverty. He summed up by quoting the technology-friendly Chief Minister of Andhra Pradesh, C. B. Naidu, who has received international recognition for promoting his state and its capital Hyderabad as India’s center of software development, "IT is the last bus to progress for the country, we can’t afford to miss it."

PANEL 12: Positioning for the 21^st Century: An Update on Southeast Asia

John Ruwitch

Panelists: Ambassador Tan Sri Dato’Abdullah Ahmad, Special Envoy, Malaysian Government; Terence Chong, Director, Singapore National Science and Technology Board; Krisda Piampongsant, Minister, Department of Commercial Affairs, Royal Thai Embassy; Gita I. Wirjawan, Director, Corporate Finance, Bahana Securities

Moderator: Warren Fernandez, news editor, The Straits Times

The panel "Positioning for the 21^st Century: An Update on Southeast Asia" offered a glimpse into Thai, Singaporean, Malaysian, and Indonesian attitudes on Southeast Asia's ongoing recovery from recent economic woes.

Focusing on the situation of his own country, Special Envoy of Malaysia to the United Nations, Ambassador Tan Sri Dato' Abdullah Ahmad painted a positive picture of Malaysia's recovery, despite his diagnosis that the region as a whole still has the economic flu. "Y2K" will be a good year for Malaysia, according to Ambassador Abdullah Ahmad. Official estimates project a growth rate of 5%, while some think tanks have predicted a higher rate of 6-6.5%. Selective sector controls and continued strong trade with the rest of the world led to Malaysia's relatively quick recovery from the contagion that has plagued the region for the past three years. Yet the government is still concerned by three factors that could hamper recovery: high US interest rates (bringing the relative value of the dollar up), a rising Yen, and the persistence of corruption. The Ambassador assured the audience that the Malaysian government remained strong and stable under Prime Minister Mahatir Mohamad. In the short run, he predicted, there would be no political uncertainty, even with presidential elections slated for May 11. In the longer term, however, the 2005 parliamentary elections may see a showdown between the current economic-minded forces in power and Islamic conservatives.